(CN) – Investors in Iovance Biotherapeutics Inc. claim they were misled when the company covertly paid a promoter to write articles and send emails pushing its stock until the Securities Exchange Commission stepped in with a cease-and-desist order.
Iovance, formerly known as Lion Biotechnologies Inc., is a clinical-stage biotechnology company that focuses on the development and commercialization of cancer immunotherapies based in San Carlos, California. The Dec. 15 lawsuit was filed with a federal judge in Delaware against the company and several executives and board members.
Beginning on Sept. 27, 2013, the complaint says Iovance hired Lindigo Holdings LLC to publish articles and disseminate “hundreds of thousands of emails” discussing Iovance to potential investors, failing to disclose that it was paid for by the company and not independent as purported. The purpose of the scheme was to artificially raise the price of Iovance stock and interest in the company, the suit says.
Iovance allegegly wasted corporate assets, paying Lindigo in stock and cash, to publish more than 10 articles on websites like SeekingAlpha.com and WallStCheatSheet.com.
“From September 2013 to April 10, 2017, the individual defendants failed to disclose and admit to the investing public that the stock promotion scheme in fact occurred, the extent of it, and the company’s involvement in it,” the complaint states.
On April 10, the SEC issued a cease and desist after finding that Iovance misled investors by commissioning the articles and emails and imposed a $100,000 penalty. The SEC order also revealed that Iovance engaged in “gun-jumping,” the illegal practice of soliciting orders to buy a new issue before registrations of a company’s initial public offering has been approved by the SEC.
The suit contends that all quarterly reports filed since September 2013 “provided a misleading portrayal of the company’s business, operations, and prospects,” having failed to disclose the stock promotion scheme and maintain proper internal controls.
Investors claim Iovance has lost and still stands to lose millions of dollars in expenditures due to the alleged scheme, including money paid to lawyers, accountants and investigators.
The class is represented by Brian E. Farnan and Michael J. Farnan of Faran LLP in Wilmington, Del. Of counsel: Philip Kim of the Rosen Law Firm in New York and Timothy W. Brown of The Brown Law Firm in Oyster Bay, New York.